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Last Updated: Monday, 14 August 2006, 09:10 GMT 10:10 UK
Germany's economy picks up speed
Steelworker at plant of German firm ThyssenKrupp
Recent data indicates Germany is seeing a turn-around
Germany's economy grew at its fastest rate for five years between April and June boosted by higher domestic demand.

The economy grew 0.9% in the quarter - despite lower export growth - a level not seen since the first quarter of 2001, official figures showed.

Figures for the previous quarter were also revised upwards, a sign that Europe's largest economy is recovering.

Analysts said the data reinforced the chances of a European rate rise, as it follows a recent upturn in France.

The French economy grew between 1.1% to 1.2% in the second quarter, more than twice the growth seen in the first quarter.

"The strong growth data provide tailwind for the European Central Bank. A rate hike at the council meeting in early October is now very, very likely," said Kornelius Purps, an HVB Group strategist.

Revised figures

"The growth impulse came mainly from the domestic side," said the German Federal Statistics Office.

"While the vitality of foreign trade weakened, investment in construction and equipment above all contributed to the economic upturn in the second quarter."

Testimony to this growth were results released on Monday by Hochtief - Germany's largest builder - which posted a rise of 8.7% in its profits for the second quarter.

Much of the World Cup, hosted by Germany, took place during this second quarter, which also acted as a fillip to the economy.

The previous quarter was revised upwards from an initial estimate of 0.4% to 0.7%.

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